Company Report

We initiate coverage on the shares of TNH with a BUY recommendation, with a 1-year target price of VND 51,800/share. This equates to a total return of 26% from the price as of Sep 1st, 2021. TNH currently possesses the following advantages: (1) a fully-owned favorable location, acquired with low initial investment & run under tight budget control, (2) targeted for capacity expansion and the opening of specialized medical services, (3) the beneficiary of a high growth Vietnamese healthcare market over the next several decades. TNH is one of few listed hospitals in Vietnam, with a good profitable operation and a forward P/E trading at 29% discount compared to regional peers. We expect TNH gross revenue to reach VND 407 bn (+21% YoY) in 2021 and VND 471 bn (+16% YoY) in 2022. For net profit, we expect growth to VND 112 bn (+3% YoY) in 2021 and VND 121 bn (+9% YoY) in 2022. For the next 5 years onwards, we expect TNH gross revenue and net profit CAGR at 22% and 26% respectively. Our forecast has factored in the current pandemic and lockdown impact in relation to the frequency of hospital visits, possible reopening scenario in 2022, and also the company’s upcoming expansion plan.

We rate a rate a strong BUY for TRA shares with the target price of VND 101,000/share – representing 29% upside from the current price on August 20th. Key investment catalysts for TRA are: 1) recent progress in the development of new herbal medicines & health supplements, while benefits from stricter quality control in Vietnam’s health supplement market, (2) lower SG&A expenses on sales with improvements in revenue of new R&D products and more efficient sales strategy, (3) higher utilization on synthetic drug factory with product transfer from Daewoong Pharma in H2 2021. Also, the company’s sales from trading & cosigned goods are expected to grow significantly with new signed distribution agreements with JW, CKD & other supplement brands. We expect TRA total sales to reach VND 2.19 tn (+15% YoY) in 2021 and VND 2.54 (+16% YoY) in 2022. Net income is expected to reach VND 275 bn (+26%) in 2021 & VND 353 bn (+29%) in 2022. As earnings growth has now begun to return from 2021 after going flat during 2015 - 2020, with lesser competition and higher diversification in products, we believe that 29% upside in the shares of TRA is achievable – especially given where industry peers are trading.

We maintain our Market Perform rating on the shares of VNM, but marginally lower our 1-year target price to VND 107,000/share (from VND 109,000/share) as we lower our target P/E multiple – implying 17% potential upside. Given the lack of expected growth for 2021 and the weak growth outlook for 2020-2024 (NPAT CAGR of 4%), VNM’s growth metrics are now lagging other local listed companies. In 2021, VNM faces dual headwinds: a) Covid-19 impact on demand; and b) a surge in raw material input prices. As such, we apply a lower target P/E of 21x (versus 23x, using VNM’s average 2018-present forward P/E) on average 2021-22F EPS. For 2021, we modestly lower our sales forecast by 1.4% to reflect lower than expected revenue from the school milk program.  Our updated estimates suggest 5.3% YoY and 1.3% YoY revenue and NPATMI growth, respectively, for VNM in 2021. In the short-term, we don’t see any rerating catalysts for the company, and we will monitor the monthly sales closely. 

DXS is set to IPO this April, and its listing on the HOSE is expected to occur in May 2021. The charter capital of DXS prior to the IPO is VND 3.2 tn. A total of 71.7 mn shares (equivalent to a 20% stake post-IPO), which comprises of 35.8 mn new shares from the Company and 35.8 mn existing shares from current shareholders, will be on offer at a price of VND 32,000/share. 

In the coming time, DXS plans to further strengthen its leading position in the primary real estate agency industry, by further expanding its capabilities to provide end-to-end real estate brokerage services. As such, the Company will continue to focus on primary brokerage, while further expanding to the secondary brokerage by utilizing its “online to offline” technology platform. For the 2021 – 2023 period, the Company ambitiously forecasts its revenue and NPATMI to grow at a CAGR of 53% and 45%, respectively. Such an impressive feat of growth is predominantly driven by its growing the primary brokerage business, with an increasing number of units to be distributed during the period. According to the firm’s management, approximately 70% of units have been committed by developers, and they are quite confident to achieve the plan. Provided that the real estate market continues its positive momentum, coupled with the increase in income from full-service brokerage, secondary brokerage and non-cyclical fee-based services to total income, we believe that DXS could achieve its target in 2021. 

For 2021, we adjust our input cost assumptions with raw milk and sugar prices to advance 12% and 25% YoY, respectively (vs. +4% and +5% previously). Accordingly, we calculate that VNM’s NPAT will arrive at VND11.5tn (+2.5% YoY), which is lower than our previous forecast of VND12.1tn. Between 2020-24, we forecast net profit CAGR to also be lower, at 5% vs. our previous estimate of 6.9%. As such, our 12-month target price for VNM, based on P/E and DCF methods, is reduced by 7.6% to VND121,000/share (from VND131,000/share). We do, however, maintain our Outperform rating on the shares of VNM given the 18% potential upside. 

Vinhomes reported 2Q20 NPATMI results of VND 3.76 tn, a decline by -48.6% YoY as the Company was operating off a high NPATMI base with recognition of a bulk sale in 2Q19, as well as from an extraordinary payment of VND 930 bn on termination of certain investment agreement for two residential projects of which development timelines were delayed. However, 1H20 NPATMI still increased by +7.6% YoY to VND 10.6 tn, fulfilling 34% of the full year target. Presales volume also rose +15.3% YoY, with a +21% YoY increase in value in 1H20. Volume performance was mainly driven by three megaprojects – Ocean Park, Smart City and Grand Park – with bulk sales driving momentum. A full 9,000 unit deliveries occurred in 1H2020, while another 21,000 are expected in 2H 2020, giving us increased confidence that VHM will achieve its 2020 guidance. VHM remains the leading developer in Vietnam, possessing the largest land bank in the country - approx. 20x the size of its nearest competitor. As many of its competitors have development projects which are bogged down procedurally, new project launches have been delayed. With several projects available for sale, VHM is the primary beneficiary of the current tight supply. As we believe the market is not effectively discounting the value of the Company’s massive 164 million sqm GFA development portfolio, we maintain a BUY rating for the shares with a VND 113,000/share price target, which implies a 42% upside. VHM is currently trading at a discounted P/E of 11.8x relative to local peers, and a respective regional peer average of 13.8x and 12.1x. 

No organic growth officially guided by VNM for 2020; we disagree: At the 2020 AGM, VNM set a revenue and earnings target of VND 59.6 tn (+5.7% YoY) and VND 10.69 tn (+1% YoY), respectively. The plan included GTN Foods (GTN: HOSE), which is starting to become consolidated to VNM from the beginning of 2020; excluding GTN, organic growth for VNM sales and net profit will be flat YoY. This is quite a conservative plan, in our view, especially when taking H1 results into account. As such, we maintain our current estimate of VND 61.5 tn in revenue (+9.1% YoY) and VND 11.35 tn in net profit (+7.6% YoY) for 2020. Positive Q2 results: Management disclosed that its interim H1 2020 results had sales advancing by 7% YoY, totaling VND 29.73 tn. Meanwhile, net profit slightly rose 3% YoY, reaching VND 5.87 tn. For Q2 2020 alone, net sales and net profit grew 6.7% YoY and 6.6% YoY. We reiterate our Outperform rating for VNM with a new 1-year target price at VND 135,000/share (from VND 116,000) based on our forward H2 2020 - H1 2021 EPS estimates and a target P/E of 23x (27% discount compared to peers), combined with the DCF method. 

The company set its FY20 targets for sales and NPAT at VND 7 tn (+20% YoY) and VND 469 bn (+25% YoY). In general, we think that it is quite aggressive given the negative impacts from Covid-19 upon the grid construction pipeline, compounded by unfavorable weather for the hydropower segment in the next 3-6 months. Management also shared that 1H20 prelim sales (+1.7% YoY) and NPAT (+6.4% YoY) fulfilled 44% and 54% of their respective targets. Although we are quite concerned about FY20 results given the unexpected nature of the Covid-19 pandemic, we believe that the company might still earn positive growth in FY21, and power through with strong double-digit growth in FY22: (1) In FY21, the grid construction sector might enjoy higher disbursement from the National Power Transmission Co. (EVNNPT) for transmission line projects on the back of Power Development Plan VIII being finalized in FY20. (2) In FY22, we estimate PC1 to achieve sales and NPAT growth at 11.2% YoY and 15.4% YoY, thanks to solid growth from the grid construction sector, coupled with full production coming online from the Lien Lap wind project.  Within our base case, we call for a  MARKET PERFORM recommendation, with a target price of VND 19,800. This offers a potential upside of 9% vs the 04-Jun-2020 closing price. As of the 04-Jun-2020 closing price at VND 18,200, PC1 P/E is traded for FY20/FY21/FY22 at 7.9x/7.6x/6.6x. Given the FY2020-2022 EPS CAGR of 9%, the current price may offer a 3Y PEG at 0.8x.

As a result of this agreement, we revise our respective 2020E net sales and pretax profit to VND7,922bn (+3.1% YoY; from VND9,643bn) and VND870bn (+86% YoY, from VND578bn). Since September 2019, DPM’s share price has rallied by 11% despite weak market sentiment. At the current price of VND14,850/share, DPM trades at a 2020E PER of 10x, compared with its 2018-19 PER range of 15.1-16.2x. Despite unfavorable weather conditions this year, DPM will likely post a strong bottom line growth thanks to (1) a higher utilization rate of all plants compared to the low base last year, (2) less intense competition and (3) shallow gas input costs. In addition, DPM’s high cash position (net cash per share of VND7,081 as of 4Q19) and a decent dividend yield (10% on par value; effectively a 7% dividend yield) may attract investors during the weak market sentiment caused by COVID-19. Nevertheless, due to the adverse impact from the drought in the Mekong Delta, we lower our target PER, PBR, and EV/EBITDA multiples to 8x, 0.7x and 3.5x (from 9x, 0.8x, and 4.5x), respectively. With an equal weighting assigned to each valuation method and using our revised earnings for 2020E (from average 2019-20E), we derive our new 12-month TP of VND16,900/share (from VND15,500), which implies 14% upside potential. We thus maintain our OUTPERFORM rating. 

Highlights. VIB posted a moderate pretax profit growth expansion of +14.2% in 4Q 2019, attaining VND 1.166 tn. This result appeared to be at odds with the sizzling earnings growth of +69.4% recorded in the first 9 months of the year. Such slower growth was mainly attributable to the fact that VIB recorded a non-recurring income VND 360 bn from its bancassurance contract with Prudential in 4Q 2018. Excluding this one-off item, growth would be +76.4% YoY and VIB would be able to continue its previous stellar growth trajectory. Credit and deposit growth tipped the scales at 34% and 46.8% YoY each, and financial ratios were improved across the board. For full year 2019, VIB recorded pretax profit of VND 4.082 tn (up by +48.8%), with universally robust growth across all income streams. Impact of Covid-19. We expect that the Covid-19 outbreak will sideline demand for home loans and auto loans in 2Q 2020. In our base case where the outbreak could be controlled by June, demand gradually recovers, and really regains its footing in 4Q 2020. Nevertheless, 2020 credit growth is forecast to be 13.2%, lower than our previous assumption of 17%. Opinion. We view VIB as an agile bank which has the largest exposure to retail lending by percentage in Vietnam. Loans to individuals accounted for more than 80% of VIB total loans, and the bank realized an impressive CAGR of +54.8% during 2016-2019. We expect growth to decelerate in 2020. Accordingly, VIB should record VND 4.85 tn in pretax profit, up by +18.8% YoY. The stock is trading at a forward P/B and P/E ratio of 0.84x and 3.6x, which is lower than the industry average of 1.07x and 7.16x. 

At the current market price of VND 30,500/share, QNS is trading at 2019 P/E and 2020 ratios of 7.3x and 7.3x, which is around a 50% discount compared to overall market valuations. We consider these price levels to be relatively cheap, despite the fact that we agree that the stock should be traded at some discount as it is traded on Upcom, and because of its large exposure of a commodity business like sugar. Our 1-year target price for QNS arrives at VND 37,000/share (from VND 35,300/share), based on a target P/E of 6x for sugar & biomass, and 10x for soymilk and other consumer businesses (confectionery, beer and beverages). With a 21% upside, we continue our Outperform rating for the stock at the moment.

VNM shares are trading at a 2019E PER of 23x and an EV/EBITDA of 14.3x, and a PER of 21.5x and EV/EBITDA of 13.2x for 2020E. We believe these levels, while not expensive, are nevertheless not yet attractive given VNM’s unexciting growth outlook (our 2018-23E net profit CAGR is just 6.5%). However, we raise our 12-month TP for VNM to VND139,000 (from VND130,000) as we roll over our valuation basis to 2020E EPS (from 2019E) and apply an unchanged target PER of 23x, set at a c.15% discount to the regional peer average. We plan to only raise our target P/E for VNM when we see early signs of strong fundamental catalysts. Thus, we maintain our MARKET PERFORM rating on the stock.